Striving to become a prudent person is a laudable goal—one usually only achieved after
impetuous youthful misadventures have taught the wisdom of prudence. Caution—particularly in
financial matters—may seem to be synonymous with prudence—but they aren’t always the same
thing. Especially when there are magicians at work.
An example of that can be found in the way most people think about Lake Forest rental
properties. There’s no sleight-of-hand from the landlord’s point of view: few would argue with the
proposition that rental properties are a prudent form of investment.
The now-you-see-it, now-you-don’t sorcery happens when the audience (in this case,
renters) view the same proposition: buying a home instead of renting. From that perspective, the
exact same prudent investment can seem to be transformed into a fearfully huge risk. Taking the
plunge—buying a home—has become a dangerously formidable commitment. It would seem to be
a more prudent course to put off that kind of years-long gamble. After all, who knows for sure
what the future will bring? Signing on the dotted line for a 15- or 30-year Lake Forest home loan
seems like a humongous step into the unknown.
This apparently prudent risk assessment is actually a conclusion that fails to see what’s
happening behind the distracting illusion. At its root is a basic truth behind the rent or buy
Unless you’re living with your parents, you’ll be paying off a mortgage—either way.
The choice comes down to paying for a landlord’s loan or paying for your own. If you take
the mortgage yourself, you have to make the payments. If you rent from the landlord, you also
have to make the payments—with the landlord acting as middleman.
As soon as you’ve peeked behind the curtain to acknowledge that fact, a couple of other
notable backstage realities are likely to come into focus:
First, if you buy a home via a fixed-rate mortgage, you can plan on what your payments will
cost—now and 15 or 30 years from now. It’s written in stone. On the other hand, if you rent, you
won’t know what your rent payments will be a few years from now. The first choice is the one that
creates predictability and stability: i.e., prudence.
Second, if you buy, eventually the loan payments will equal zero. If you rent—well, having
seen behind the curtain, you know what happens eventually: i.e., more payments.
At least in the world of Lake Forest rental properties, there is a distinct difference between
prudence and caution. In the rent-vs-buy calculus, it’s pretty clear which is which.
Once you have peeked behind the curtain, you may also conclude that it’s an even more
prudent idea to become a landlord yourself. And right now, there are some excellent Lake Forest
rental properties that could make that possible.
To investigate further, give me a call!
Realtor BRE # 01880463, The Associates Realty Group